Neoliberalism: A Bibliographic Review
by William Davies
The term ‘neoliberalism’ has become increasingly familiar over recent years. The term was relatively unheard-of until the 1990s, but was then adopted principally by the critics of a perceived free market orthodoxy, which was spreading around the world under the auspices of the ‘Washington Consensus’. The ‘anti-globalisation movement’, which rose to prominence with the 1999 Seattle protests against the World Trade Organisation, further advanced the pejorative sense of neoliberalism as a form of market fundamentalism, imposed upon developing nations by the United States government and multilateral institutions. The assumption underlying this account of neoliberalism was typically that it arose with the elections of ‘new right’ political leaders, Margaret Thatcher and Ronald Reagan in particular, in the late 1970s and early ‘80s. But there was relatively little scholarly work done at this time on the longer history of neoliberal thought preceding that political shift.
The beginning of the global financial crisis in the summer of 2007 drew fresh attention to the meaning and history of neoliberalism, while also highlighting the priority that neoliberal policy accords to financial markets and financial institutions. The fact that this crisis emanated from an apparent centre and driver of neoliberalism, namely Wall Street, shifted the focus away from the neo-colonial, globalising aspects of neoliberal reform, towards the question of neoliberalism’s core rationalities and genealogy. Partly for this reason, no doubt, a wave of new scholarly work appeared, which paid far closer attention to the longer history of neoliberal thought, as far back as the 1920s. This includes work on think tanks, such as the Mont Pelerin Society, and academic traditions, such as the Chicago School of economics.
In an effort to get away from the simply pejorative use of the term neoliberalism, which can be attached indiscriminately to various forms of anti-democratic or pro-corporate power, the more historicist approach to the concept highlights its fluidity and contingent development. However, this approach also risks lapsing into pure historical description, without critique or an account of how ideas translate into policies and strategies. Others apply a more sociological and critical method, which aims to examine which aspects of neoliberalism are at work amongst elites and governments today. This poses the question of precisely how much of neoliberalism has survived the global financial crisis, and through what means this survival has been achieved.
Definitions of neoliberalism across these literatures are various. But they tend to share four things:
Victorian liberalism is viewed as an inspiration for neoliberalism, but not a model. Neoliberalism is an inventive, constructivist, modernizing force, which aims to produce a new social and political model, and not to recover an old one. Neoliberalism is not a conservative or nostalgic project.
Following this, neoliberal policy targets institutions and activities which lie outside of the market, such as universities, households, public administrations and trade unions. This may be so as to bring them inside the market, through acts of privatization; or to reinvent them in a ‘market-like’ way; or simply to neutralize or disband them.
To do this, the state must be an active force, and cannot simply rely on ‘market forces’. This is where the distinction from Victorian liberalism is greatest. Neoliberal states are required to produce and reproduce the rules of institutions and individual conduct, in ways that accord with a certain ethical and political vision.
This ethical and political vision is dominated by an idea of competitive activity, that is, the production of inequality. Competition and inequality are valued positively under neoliberalism, as a non-socialist principle for society in general, through which value and scientific knowledge can best be pursued.
This bibliographic essay focuses on texts drawn from sociology, history of economics and more historical or cultural traditions of political economy, to look at the ideas, rationalities and policies through which neoliberalism is constructed and sustained. It does not address the political-economic question of how neoliberal economies have actually performed empirically.
Pioneers of neoliberal thought
The origins of neoliberalism can be traced back to the years preceding the Great Depression, and to the writings of Ludwig von Mises criticising the rationality of socialism. This work, which catalyzed the ‘socialist calculation debate’ of the 1920s and ‘30s, and to which Friedrich von Hayek was also a contributor, involved a renewal of the case for economic liberalism. Liberalism as exemplified by Victorian laissez-faire was perceived to have peaked around 1870, but been in decline ever since, with the rise of corporations, trade unions, social policies, regulation and state socialism. The task faced by Mises, Hayek and those that supported them was to re-imagine economic liberalism in ways that either accommodated these new developments or could effectively rebuff them.
The 1930s exacerbated perceived anti-liberal trends, with the appearance of protectionism, macroeconomics, the New Deal in the United States and totalitarianism in Europe. These developments heightened the anxiety of liberals in these countries, who set about reinventing the argument for the price system of the market, in a similar spirit to how Mises had done. In 1938, the French philosopher Louis Rougier organized the Colloque Walter Lipmann in Paris, in honour of the American journalist Lipmann who was a vocal critic of the New Deal. This occasion is thought to be the first time when the term ‘neoliberalism’ was used.
During and after World War Two, the shape of neoliberal thought and advocacy would become clearer. 1944 saw the publication of Hayek’s bestseller, The Road to Serfdom, which served as a popular introduction to neoliberal ideas for decades. In 1947, Hayek founded the Mont Pelerin Society, as a think tank and network for liberal intellectuals from around the world. Think tanks would go on to serve as a crucial conduit between neoliberal thinkers and policy-makers. The post-War period saw a growing split between a European strand of neoliberalism (or ‘ordoliberalism’) and the American strand.
– Burgin, A. (2012). The Great Persuasion: reinventing free markets since the Depression. Cambridge: Harvard University Press
– Gane, N. (2013). The Emergence of Neoliberalism: Thinking Through and Beyond Michel Foucault’s Lectures on Biopolitics. Theory, Culture & Society. 31: 1.
– Gane, N. (2014). Sociology and Neoliberalism: A Missing History. Sociology. 48: 1.
– Mirowski, P. & Plehwe, D. (eds.) (2009). The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective. Cambridge: Harvard University Press
– Phillips-Fein, K. (2009). Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan. Yayasan Obor Indonesia
– Polanyi, K. (1957). The Great Transformation: The Political and Economic Origins of our Times. Boston: Beacon Press
– Stedman-Jones, D. (2012). Masters of the Universe: Hayek, Friedman and the Birth of Neoliberal Politics. Princeton: Princeton University Press
Ordoliberalism and the ‘social market’
Up until the 1950s, many neoliberal thinkers assumed that large elements of socialism or at least social democracy were inevitable and necessary. The task, therefore, was to find a space for the free market alongside institutions of social security and strong rule of law. In Germany, this position was advanced by the school of Ordoliberalism, which had emerged in Freiburg in the 1930s, under the leadership of Walter Eucken and around the journal Ordo. The ordoliberals were principally lawyers and liberal philosophers, who subscribed to a neo-Kantian epistemology, and believed that law should be used to impose formal ideas upon society. The idea of competition, as manifest in the free market, was viewed as a guarantor of political rights, but could not be safeguarded by the market alone. The state was therefore necessary to enforce a competitive order, through active and normative anti-trust enforcement. This legally-mandated market was entirely compatible with strong institutions of social security and public provision, producing what was known as the ‘social market’.
Hayek was initially very sympathetic to the ordoliberal position. Eucken and his colleagues were influential in designing the reconstructed German economy in the late 1940s. The inclusion of strong antitrust provisions in the 1949 German constitution and the 1957 Treaty of Rome (forming the European Community) are viewed partly as ordoliberal achievements.
– Bonefeld, W. (2012). Freedom and the Strong State: On German Ordoliberalism. New Political Economy. 17: 5.
– Gerber, D. (1994). Constitutionalizing the Economy: German Neo-Liberalism, Competition Law and the “New” Europe. The American Journal of Comparative Law. 42: 1. 25-84
– Labrousse, A., & Weisz, J.-D. (2001). Institutional economics in France and Germany: German Ordoliberalism versus the French regulation school. Springer.
– Norr, K. (1996). On the concept of the “economic constitution” and the importance of Franz Böhm from the viewpoint of legal history. European Journal of Law and Economics. 3: 4. 345-356
– Ptak, R. (2009). Neoliberalism in Germany: Revisiting the Ordoliberal Foundations of the Social Market Economy. In Mirowski & Plehwe (eds.) (2009).
The Chicago School and economic ‘imperialism’
The Chicago School of economics would exert a strong influence over applied neoliberal policies from the 1970s onwards. Through extending neo-classical economics into new domains of social and individual life, through categories such as ‘human capital’, it has arguably contributed to the construction of neoliberal subjectivity more broadly. In its early years of the 1920s and ‘30s, the Chicago School of economics was not especially known for its liberalism, although its first generation members (Frank Knight and Jacob Viner) are credited with introducing an aggressive and skeptical style of reasoning which inspired a number of the second generation, notably Milton Friedman and George Stigler. This second generation, initially led by Aaron Director, is principally known for a resolute belief in the capacity of economics to explain all forms of human behavior, whether inside or outside of markets. For this reason, they have been criticized as ‘economic imperialists’ within the academy.
The Chicago School departed from the normative and idealist perspective of many of the European neoliberals over the course of the 1950s. In particular, they became increasingly skeptical of regulation, and developed an argument for the potential efficiency of monopoly and non-market agreements; this argument was influential in American antitrust authorities from the mid-1970s onwards. In macroeconomics, Friedman predicted the demise of Keynesianism, and developed the case for monetarism that was taken up in the late 1970s. And in applying neo-classical economics to ‘social’ phenomena such as education, crime and the family, Gary Becker pre-figured a certain type of calculative vision of psychology that many view as the most transformative achievement of neoliberalism. In this respect, the Chicago School can be viewed as heirs to Jeremy Bentham.
– Davies, W. (2010). Economics and the ‘nonsense’ of law: The case of the Chicago antitrust revolution. Economy & Society. 39: 1.
– Engelmann, S. (2003). Imagining Interest in Political Thought: Origins of Economic Rationality. Durham: Duke University Press
– Fine, B. & Milonakis, D. (2009). From Economics Imperialism to Freakonomics: The Shifting Boundaries Between Economics and Other Social Sciences. London: Routledge
– Nik-Kah, E. & Van Horn, R. (2012). Inland empire: economics imperialism as an imperative of Chicago neoliberalism. Journal of Economic Methodology. 19: 3. 259-282
– Van Horn, R. (2011). Chicago’s Shifting Attitude Toward Concentrations of Business Power (1934–1962). Seattle Law Review. 34: 4
– Van Horn, R. et al. (eds.) (2013). Building Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics Program. Cambridge: Cambridge University Press
– Van Horn, R. & Mirowski, P. (2009). The Rise of the Chicago School of Economics. In Mirowski & Plehwe (eds.) (2009).
Neoliberalism in action
The crisis of Keynesian macroeconomics (occasioned by the rise of ‘stagflation’ in the early 1970s) and of Fordist production (symptomized by declining productivity growth and profitability) created an opportunity for a new paradigm of economic policy-making. This was initially exploited in the United States and United Kingdom, before policies were exported internationally via multilateral institutions and economic experts. Prior to this breakthrough, the Chicago School had already shaped the policy regime of Pinochet in Chile, thanks to the training of Chilean economists in Chicago and the advice provided by Friedman to the government.
Marxist analyses of applied neoliberalism view it as the mobilization of the state, so as to restore the rate of profit. To this end, the neoliberal state targets inflation through deflationary, monetarist policies, and targets trade union power through legislation, police power and privatization. The effect of this is far greater returns to capital, and lower returns to labour, resulting in dramatic increases in inequality from the 1980s onwards. With declining investment opportunities following the crisis of Fordist-Keynesianism, the neoliberal state discovers non-productive paths to private profit, in households, the public sector and financial sector.
Analyses that are more influenced by post-structuralism, by Foucault in particular, look at neoliberalism more as an attempt to remake social and personal life in its entirety, around an ideal of enterprise and performance. Here, an ethos of competitiveness is seen as permeating culture, education, personal relations and orientation to the self, in ways that render inequality a fundamental indicator of ethical worth or desire. For many such theorists, economists themselves are viewed as political actors, who extend the limits of calculability. The state remains a central actor, according to this perspective, in forcing institutions to reinvent themselves and measure themselves according to this vision of agency. Distinctive neoliberal policies are those which encourage individuals, communities, students and regions to exert themselves competitively, and produce ‘scores’ of who is winning and losing.
A common theme between the Marxist and the post-structuralist accounts of neoliberalism is the rising power and authority of corporate and quasi-corporate actors and experts in public life. During the 1990s, the sense that social life was increasingly regulated by non-state intermediaries or private firms led to increased awareness of ‘governance’, ‘governmentality’ and risk as techniques for managing neoliberal or ‘advanced liberal’ societies in a calculated fashion. Arguably it is the managerial freedom of corporate and quasi-corporate actors which is maximized under applied neoliberalism, and not markets as such.
– Amable, B. (2011). Morals and politics in the ideology of neo-liberalism. Socio-economic Review. 9: 1
– Babb, S. (2001). Managing Mexico: Economists from Nationalism to Neoliberalism. NJ: Princeton University Press
– Dardot, P. & Laval, C. (2014). The New Way of the World: On Neoliberal Society. London: Verso
– Davies, W. (2014). The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition. London: Sage
– Foucault, M. (2008). The Birth of Biopolitics: Lectures at the Collège De France, 1978-79. Basingtoke: Palgrave
– Gamble, A. (1988). The Free Economy & The Strong State: The Politics of Thatcherism. Durham: Duke University Press
– Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press
– Mirowski, P. (2009). Postface: Defining Neoliberalism. In Mirowski & Plehwe (eds.) (2009).
– Peck, J. (2010). Constructions of Neoliberal Reason. Oxford: Oxford University Press
– Rose, N. (1996). The death of the social? Re-figuring the territory of government. Economy & Society. 25
– Valdes, J. (1995). Pinochet’s Economists: The Chicago School in Chile. Cambridge: Cambridge University Press
Financial crisis and the future of neoliberalism
In the years following the global financial crisis of 2007-09, and the subsequent ‘Great Recession’, a couple of different slants appeared in the research on neoliberalism. Firstly, there was a heightened awareness that applied neoliberalism has in practice translated into ‘financialisation’. This means that profits made in the financial sector account for an ever-greater share of profitability overall, made thanks to financial deregulation and growing household, consumer and student indebtedness. The banking bail-outs of 2008 highlighted the crucial role of the state in under-writing the financial sector, to allow for privatization of gains and socialization of losses. In place of profitable production, neoliberalism discovers sources of profit through expanding risk calculus into non-productive areas of social life, which can then be drawn into the financial economy. When it transpires that some of these risks cannot be handled by the private financial economy, they are transferred to the state. The complex neoliberal symbiosis between state and corporations (in this case, banks) attains a new form.
Secondly, the endurance of neoliberalism is itself a matter which requires explanation. The global financial crisis appears to have resulted in a strengthening, and not a weakening, of neoliberalism and the experts that propagate it. States appear even more committed to defending the interests of finance, against other political interests, and increasing the reach of finance into everyday life. Meanwhile, state borrowing is represented as the cause of the crisis, rather than the result, leading to further dismantling of social protections and public sector institutions. On the other hand, the ideology, legitimacy or hegemony of neoliberalism, as a system dedicated to equal opportunity, enterprise and wealth-creation, is now far weaker than before the crisis. There is thus some debate as to whether neoliberalism is ‘alive’, ‘dead’ or in some paradoxical ‘zombie’ state.
– Crouch, C. (2011). The Strange Non-Death of Neoliberalism. London: Polity
– Davies, W. (2013). When is a Market Not a Market?: ‘Exemption’, ‘externality’ and ‘exception’ in the case of European State Aid rules. Theory Culture & Society. 30: 2. 32-59
– Engelen, E. et al (2011). After the Great Complacence: Financial Crisis and the Politics of Reform. Oxford: Oxford University Press
– Gamble, A. (2009). The Spectre at the Feast: Capitalist Crisis and the Politics of Recession. Basingstoke: Palgrave
– Krippner, G. (2012). Capitalizing on Crisis: The Political Origins of the Rise of Finance. Cambridge: Harvard University Press
– Mirowski, P. (2013). Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown. London: Verso
– Peck, J. et al. (2010). Postneoliberalism and its Malcontents. Antipode. 41.
– Streeck, W. (2011). The Crises of Democratic Capitalism. New Left Review. 71. Oct-Nov